Success in Europe fails to offset Tennent’s losses

DOMINIC JEFF

TENNENT’S owner C&C ­yesterday warned that its annual ­profits would fall short of last year after it suffered worse-than-expected trading in the third quarter.

The Irish firm, which also owns the Bulmers and Magners cider brands and drinks wholesaler Wallaces, said volumes in Scotland during the three months to 30 November were 2.4 per cent lower than a year earlier.

With the difficulties replicated south of the Border and in C&C’s native Ireland, it now expects to deliver a full-year operating profit of about €115 million (£89m), down from €126.7m in the previous year.

The company said difficult conditions continued during the Christmas period, but added: “Looking beyond [the financial year to] 2015, the group expects the core markets of Ireland and Scotland to continue delivering resilient performance through strong, brand-led multi-­beverage operating models.

“In the US, the significant investments and focused activity in financial year 2015 should begin to have a positive impact on performance in 2016.”

The group’s brands performed better in export markets excluding the US. Tennent’s enjoyed a huge rise in popularity on the continent, where ­volumes were up 62.1 per cent compared with a year earlier.

In England and Wales, C&C is advancing plans to “significantly reduce costs” which will return the cider business to ­“acceptable levels of profitability”, expand margins and increase investment behind the brand ­portfolio.

October and November proved to be particularly quiet months in Scotland and Ireland, the firm said.

In England and Wales, pressure on pricing increased in the off-trade, “reflecting intensifying competition at both retail and brand owner points in the supply chain”, it said.

Cider sales were down 9.8 per cent in volume terms and 18.2 per cent in terms of revenue. C&C said it was exploring a range of initiatives to improve profitability.

Despite the bleaker outlook, broker Investec retained its “buy” recommendation on C&C, pointing out that a share buyback programme was in the offing that could reduce the group’s issued capital by 10 per cent. That would cost about €127m at current prices and would be funded from the ­company’s cash generation and balance sheet.

Analyst Ian Hunter said: “While the pull back in forecasts will undoubtedly have a short-term impact on the share price, we believe downside will be tempered by the share buyback programme.”